[Hanwha Life Expos?] ③ Targeting Southeast Asia 'Retail'... Personalized Services with Digital Capabilities

Securing Competitiveness in Retail Avoided by Global Financial Firms
Advantageous Due to High Proportion of MZ Generation in Vietnam and Inni
Must Prepare for Interest Rate, Exchange Rate, and Regulatory Risks

Hanwha Financial Group is focusing on retail banking in the Southeast Asian financial market. Emerging powerhouses in Southeast Asia such as Vietnam and Indonesia have financial markets open to foreign capital, and global major financial firms have long established their presence there. Hanwha Financial inevitably faces disadvantages in terms of brand recognition and loyalty. However, the main revenue sources of these companies are concentrated on large institutional investors or a small number of high-net-worth individuals. Retail banking targeting individuals is relatively underdeveloped. Hanwha Financial sees this as an opportunity.

Hanwha Financial believes its chances of success in retail banking lie in the young population demographics of key Southeast Asian countries. In Vietnam, the working-age population (15-64 years) accounts for more than 70% of the total population, and the median age among its 100 million people is 32. In Indonesia, 54% of the population belongs to the 20-30 age group. These conditions are ideal for transplanting Hanwha Financial’s fintech (finance + technology) capabilities locally. A Hanwha Life Insurance official said, "Global financial firms have neglected retail banking because the cost relative to revenue was too high when dealing with individuals one by one," adding, "Hanwha Financial has extensive experience providing personalized services through online channels and platforms, so it can sufficiently appeal to young customers who prefer non-face-to-face interactions."

In Indonesia, where Hanwha Life recently acquired a bank following local life and non-life insurers, the potential for retail growth is higher compared to other major Southeast Asian countries. According to the report "Indonesia: The Battleground for K-Finance" published by Hana Financial Management Research Institute earlier this year, Indonesia’s financial industry accounted for 4.2% of GDP in 2022, lower than Thailand (9.4%), South Korea (6.4%), and Malaysia (4.6%). Penetration rates by financial sector (account opening rates) show banks at 52.8%, about half, while securities (4.3%), credit cards (1.6%), debit cards (4.4%), and insurance (2.7%) are all below 5%. As bank usage surges, non-bank sectors such as securities and insurance are in the warming-up phase for full-scale growth.

Hanwha Financial’s early retail-focused strategy in Vietnam has recently shown rapid growth. Phintraco Securities, Hanwha Investment & Securities’ local subsidiary in Vietnam, has been profitable since 2021. This is the result of targeting individual investors by developing Mobile Trading Systems (MTS) and Web Trading Systems (WTS). Hanwha Life Vietnam has recorded profits over the past five years. The goal is to enter the top five in the Vietnamese market and achieve an annual pre-tax profit of 100 billion KRW by 2030.

Hanwha Financial has invested heavily in the Lippo Group as a key partner for its Indonesian strategy because of Lippo Group’s vast retail customer data. Based on the corporate philosophy of "growing together with the middle class," Lippo Group operates businesses essential to the middle class, including housing, food, clothing, education, and healthcare. Lippo Group’s affiliate, Siloam Hospitals, is Indonesia’s largest private healthcare provider, operating 41 hospitals and over 90 clinic centers nationwide, including the capital Jakarta. Lippo Group is a top-tier local real estate company and also owns a large retail chain called Lippo Mall. Through the Lippo Group Education Foundation, it operates 52 schools from kindergarten to high school and two universities. A Hanwha Life official said, "Lippo Group essentially holds customer data covering almost every aspect of life?from birth, schooling, buying a home, saving, to investing. It is quite difficult for a single company to build such an ecosystem, so from Hanwha Financial’s perspective, it is a strong ally."

Once the acquisitions of Nobu Bank and Chiptadana Securities & Asset Management are completed, Hanwha Financial will become a bona fide global financial group holding multi-licenses in Indonesia, including banking, life insurance, non-life insurance, securities, and asset management. Of course, the future is not without challenges. The Indonesian financial market is fiercely competitive, often called a global battleground, and financial regulators impose strict regulations. There are also many sudden risks related to the global economy, interest rates, and exchange rates. Over the past year, about 100 local branches of South Korea’s four major commercial banks?KB Kookmin, Shinhan, Hana, and Woori?have closed in Indonesia. For example, Bukopin Bank, acquired by KB Kookmin Bank in 2018, posted a loss of 261.3 billion KRW last year, becoming a burden on its parent company. Lee Sung-yeop, a research fellow at Hana Financial Management Research Institute, said, "Indonesia has over 100 financial firms across sectors, with the four major banks, local conglomerates, and foreign financial firms expanding investments to secure market dominance. Korean financial firms need to strengthen their customer base and networks through an 'inorganic' strategy of cooperating with local financial firms rather than pursuing organic growth alone."